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ale4655 [162]
3 years ago
13

If a payback period for a project is greater than its expected useful life, the project's return will always exceed the company'

s cost of capital. entire initial investment will not be recovered. project would only be acceptable if the company's cost of capital was low. project will always be profitable.
Business
1 answer:
Rudiy273 years ago
3 0

Answer:

entire initial investment will not be recovered.

Explanation:

Payback period is one of the methods used in capital budgeting.

Payback period calculates how long it takes for the amount invested in a project to be recovered from its cummulative cash flows.

For example, if a project costs $360 and the cash flow each year for its 6 years useful life is $120. The amount invested would be gotten back from the cummulative cash flow in 3 years.

But if a project costs $360 and the cash flow each year for its 2 years useful life is $120. The amount invested would never be gotten back the cummulative cash flow. Therefore, the entire investment amount will never be entirely recovered.

The project will always not be profitable

I hope my answer helps you.

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